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ETFs in Focus as IMF Raises Economic Outlook for Asia
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According to a CNBC article, the Asia-Pacific region is set for growth, expanding as much as 4.6% this year, per the International Monetary Fund's latest projection. This forecast is up 0.3% from IMF’s projections in last October.
The report highlights the contribution of China's recovery and India's strong growth, as major driving factors. This positive news comes at a time when other parts of the world are anticipating a slowdown due to tightened monetary policies and the recent invasion of Ukraine by Russia.
The revised outlook for the region has pumped up the Asia-Pacific contribution to global growth to 70%. The major drivers of this growth are the two largest emerging market economies in the region, India and China, which are projected to account for approximately half of the world's growth this year.
How Will China’s Economy Contribute?
Although emerging markets in the Asia-Pacific region are driving optimism, the International Monetary Fund has downgraded its economic outlook for Japan, Australia, New Zealand, Singapore, and South Korea. Although strong external demand from China is likely to provide some relief to the developed economies in the region, the domestic and external factors of the countries could result in dragging down growth.
IMF raised its growth forecasts for the second largest economy in the world to 5.2%, with a pick up in private consumption in China being one of the growth drivers, along with high consumption and investment. However, according to IMF, the region’s growth could take a hit from China’s ongoing geopolitical tensions.
In the first quarter, China’s economy expanded at a faster pace than anticipated, driven by strong consumption of services. However, factory output has not been as promising, mainly due to the sluggish global economic environment. Furthermore, with prices falling and bank savings on the rise, there are concerns regarding the sustainability of demand.
How is India Contributing?
Although the International Monetary Fund has reduced its projections for India's growth for the entire year, it still predicts that the economy will grow by 5.9% in 2023. As per a Reuters article, in April, India's factory activity grew at its fastest pace in four months, primarily due to the strong expansion of new orders and output. This indicates sustained demand and an optimistic outlook.
Despite the deceleration of growth in various other countries due to sluggish global economic conditions, India is expected to remain one of the fastest-growing major economies. Foreign demand witnessed the highest growth rate in four months, in April, leading to increased optimism. However, inflation is expected to remain high exceeding the Reserve Bank of India's medium-term target.
ETFs in Focus
IMF has raised the forecast for Malaysia, the Philippines, and Laos to 4.5%, 6% and 4% respectively. With the Asia-Pacific region witnessing increased growth forecasts, let’s dive into some ETFs with exposure to it.
The fund tracks the performance of the FTSE Developed Asia Pacific All Cap Index, which measures the investment return of stocks issued by companies located in the major markets of the Pacific region. Having a basket of 2475 securities, the fund is majorly invested in sectors like industrials with 19.18%, followed by consumer discretionary with 17.22% and financials with 16.49%.
VPL has the top allocation in Japan with 57.12% of the assets of the fund. The next two spots are taken by Australia and Korea, with 19.17% and 12.80%, respectively. It has gathered an asset base of $6.07 billion and charges an annual fee of 0.08%.
The fund has a Zacks ETF Rank #3 (Hold) with a Low risk outlook. Earning 6.14% year to date, VPL has given returns of 1.79% over the past year.
The fund seeks to closely match the returns and characteristics of the total return performance of the S&P Emerging Asia Pacific BMI Index, which measures the investable universe of publicly traded companies domiciled in the emerging Asia Pacific markets. GMF has 1323 securities in its basket with financials, information technology and consumer discretionary having a double-digit share of 20.46%, 20.09% and 15.27%, respectively.
The fund has the top allocation in China with 41.50%, followed by India and Taiwan with 24.02% and 21.57%, respectively. GMF has amassed an asset base of $358.47 million and charges an annual fee of 0.49%.
It has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook. The fund has gained 2.48% year to date, having lost 3.23% over the past year.
The fund tracks the investment results of the MSCI Emerging Markets Minimum Volatility Index, which is composed of emerging market equities that have lower volatility characteristics relative to the broader emerging equity markets. The fund holds a basket of 313 securities, with financials (24.48%) taking the top spot. The next spots are taken by information technology and communication, with 15.36% and 15.22%, respectively.
China, Taiwan and India take the top three spots with 26.45%, 18.60% and 12.51%, respectively. EEMV has gathered an asset base of $4.67 billion, charging an annual fee of 0.25%.
It has a Zacks ETF Rank #3 (Hold) with a Low risk outlook. The fund has lost 3.74% over the past year but has given returns of 4.69% year to date.
The fund seeks to track the investment results of the FTSE China 50 Index, which is composed of large-capitalization Chinese equities that trade on the Hong Kong Stock Exchange.
The top allocation of the fund is in consumer discretionary, with 34.49%, followed by financials and communication, with 28.39% and 17.71%, respectively. The fund has amassed an asset base of $5.54 billion and charges an annual fee of 0.74%.
It has a Zacks ETF Rank #5 (Strong Sell) and a Medium risk outlook. FXI has lost 0.28% year to date and 6.47% over the past year.
The fund seeks to track the investment results of the Nifty 50 Index, which is composed of 50 of the largest Indian equities. With 50 securities in its basket, the fund has a major tilt toward the financial sector with 38.48%, followed by information technology and energy with 12.75% and 12.17%, respectively.
INDY has gathered an asset base of $591.20 million and charges an annual fee of 0.89%. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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ETFs in Focus as IMF Raises Economic Outlook for Asia
According to a CNBC article, the Asia-Pacific region is set for growth, expanding as much as 4.6% this year, per the International Monetary Fund's latest projection. This forecast is up 0.3% from IMF’s projections in last October.
The report highlights the contribution of China's recovery and India's strong growth, as major driving factors. This positive news comes at a time when other parts of the world are anticipating a slowdown due to tightened monetary policies and the recent invasion of Ukraine by Russia.
The revised outlook for the region has pumped up the Asia-Pacific contribution to global growth to 70%. The major drivers of this growth are the two largest emerging market economies in the region, India and China, which are projected to account for approximately half of the world's growth this year.
How Will China’s Economy Contribute?
Although emerging markets in the Asia-Pacific region are driving optimism, the International Monetary Fund has downgraded its economic outlook for Japan, Australia, New Zealand, Singapore, and South Korea. Although strong external demand from China is likely to provide some relief to the developed economies in the region, the domestic and external factors of the countries could result in dragging down growth.
IMF raised its growth forecasts for the second largest economy in the world to 5.2%, with a pick up in private consumption in China being one of the growth drivers, along with high consumption and investment. However, according to IMF, the region’s growth could take a hit from China’s ongoing geopolitical tensions.
In the first quarter, China’s economy expanded at a faster pace than anticipated, driven by strong consumption of services. However, factory output has not been as promising, mainly due to the sluggish global economic environment. Furthermore, with prices falling and bank savings on the rise, there are concerns regarding the sustainability of demand.
How is India Contributing?
Although the International Monetary Fund has reduced its projections for India's growth for the entire year, it still predicts that the economy will grow by 5.9% in 2023. As per a Reuters article, in April, India's factory activity grew at its fastest pace in four months, primarily due to the strong expansion of new orders and output. This indicates sustained demand and an optimistic outlook.
Despite the deceleration of growth in various other countries due to sluggish global economic conditions, India is expected to remain one of the fastest-growing major economies. Foreign demand witnessed the highest growth rate in four months, in April, leading to increased optimism. However, inflation is expected to remain high exceeding the Reserve Bank of India's medium-term target.
ETFs in Focus
IMF has raised the forecast for Malaysia, the Philippines, and Laos to 4.5%, 6% and 4% respectively. With the Asia-Pacific region witnessing increased growth forecasts, let’s dive into some ETFs with exposure to it.
Vanguard FTSE Pacific ETF (VPL - Free Report)
The fund tracks the performance of the FTSE Developed Asia Pacific All Cap Index, which measures the investment return of stocks issued by companies located in the major markets of the Pacific region. Having a basket of 2475 securities, the fund is majorly invested in sectors like industrials with 19.18%, followed by consumer discretionary with 17.22% and financials with 16.49%.
VPL has the top allocation in Japan with 57.12% of the assets of the fund. The next two spots are taken by Australia and Korea, with 19.17% and 12.80%, respectively. It has gathered an asset base of $6.07 billion and charges an annual fee of 0.08%.
The fund has a Zacks ETF Rank #3 (Hold) with a Low risk outlook. Earning 6.14% year to date, VPL has given returns of 1.79% over the past year.
SPDR S&P Emerging Asia Pacific ETF (GMF - Free Report)
The fund seeks to closely match the returns and characteristics of the total return performance of the S&P Emerging Asia Pacific BMI Index, which measures the investable universe of publicly traded companies domiciled in the emerging Asia Pacific markets. GMF has 1323 securities in its basket with financials, information technology and consumer discretionary having a double-digit share of 20.46%, 20.09% and 15.27%, respectively.
The fund has the top allocation in China with 41.50%, followed by India and Taiwan with 24.02% and 21.57%, respectively. GMF has amassed an asset base of $358.47 million and charges an annual fee of 0.49%.
It has a Zacks ETF Rank #3 (Hold) and a Medium risk outlook. The fund has gained 2.48% year to date, having lost 3.23% over the past year.
iShares MSCI Emerging Markets Min Vol Factor ETF (EEMV - Free Report)
The fund tracks the investment results of the MSCI Emerging Markets Minimum Volatility Index, which is composed of emerging market equities that have lower volatility characteristics relative to the broader emerging equity markets. The fund holds a basket of 313 securities, with financials (24.48%) taking the top spot. The next spots are taken by information technology and communication, with 15.36% and 15.22%, respectively.
China, Taiwan and India take the top three spots with 26.45%, 18.60% and 12.51%, respectively. EEMV has gathered an asset base of $4.67 billion, charging an annual fee of 0.25%.
It has a Zacks ETF Rank #3 (Hold) with a Low risk outlook. The fund has lost 3.74% over the past year but has given returns of 4.69% year to date.
IShares China Large-Cap ETF (FXI - Free Report)
The fund seeks to track the investment results of the FTSE China 50 Index, which is composed of large-capitalization Chinese equities that trade on the Hong Kong Stock Exchange.
The top allocation of the fund is in consumer discretionary, with 34.49%, followed by financials and communication, with 28.39% and 17.71%, respectively. The fund has amassed an asset base of $5.54 billion and charges an annual fee of 0.74%.
It has a Zacks ETF Rank #5 (Strong Sell) and a Medium risk outlook. FXI has lost 0.28% year to date and 6.47% over the past year.
IShares India 50 ETF (INDY - Free Report)
The fund seeks to track the investment results of the Nifty 50 Index, which is composed of 50 of the largest Indian equities. With 50 securities in its basket, the fund has a major tilt toward the financial sector with 38.48%, followed by information technology and energy with 12.75% and 12.17%, respectively.
INDY has gathered an asset base of $591.20 million and charges an annual fee of 0.89%. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.